Sectional title schemes act streamlined

There have been many changes to the Sectional Title Schemes Management Act that was promulgated in 2011 and which came into force in October last year.

“The old act contained 61 sections. The new act has 22 sections and the wording is now less draconian in that ‘may’ is used more often than ‘shall’ and ‘must’. The idea behind the drafting of the new act is to streamline it and make it easier to understand,” said lawyer Marina Constas, a sectional title expert and director of Biccari Bollo Mariano Inc (BBM), who regularly holds workshops.

Changes include the replacement of the Sectional Titles Regulations Board with an “advisory council” and a unanimous resolution which means all members who cast their votes must do so in favour, otherwise it may be vetoed by an abstention.

The new act says the body corporate must maintain an administrative fund sufficient to cover the estimated annual operating cost of the scheme.

“The industry should embrace this rule,” Ms Constas said.

“In my experience, many trustees manage their buildings well and have always catered for a ‘buffer’ fund. However, an inordinate number of trustees find themselves in financial difficulty with the building being run from ‘hand to mouth’ on a monthly basis. This reserve fund will ensure that a building does not fall into disrepair.”

Ms Constas said trustee liability has been tightened up. Before the new act, there was an indemnity which protected trustees, apart from two instances: fraud and gross negligence.

“Now, the trustees are still indemnified, but, if they breach their fiduciary duty in any way, they could be sued.”

There have also been several changes to the management rules.

The definition of an “accounting office” has been omitted which means every body corporate, however small, will have to be audited.

“Now trustees must, for the purpose of transparency, distribute the minutes of general and trustee meetings to everyone entitled to attend, not later than seven days after the date of the meeting. Before the new act, minutes were only made available for inspection on written application of an owner or registered mortgagee,” Ms Constas said.

“Now, registered bondholders, holders of future development rights and the managing agent, may in principle, attend and speak at trustees’ meetings, but they are not allowed to propose a motion or vote.

“The two-year prison sentence, or the payment of a fine if a developer fails to call a meeting, remains in place. But the body corporate can call the meeting if the developer does not, and can recover the costs they reasonably incur.

“There are some interesting changes to the annual general meetings,” Ms Constas said.

“If a new development is registered after October 7 2016, the financial year of that specific building is from the first day of October to the last day of September of the following year, unless otherwise decided by the body corporate.

“A change to the voting rules is that a motion at a general meeting need not be seconded.”

Among other important changes are: a person cannot act as a proxy for more than two members; previously, the body corporate could not make loans from its own funds but now it requires a unanimous resolution to do so and the new interest rate on collection of arrear levies is the maximum rate set by the National Credit Act.

The body corporate must now prepare a plan setting out, among other things, the major capital expenses expected to require maintenance, repair and replacement within the next 10 years, and it must explain the present state of those items.

“A new concept of the ‘executive managing agent’ has been included in the rules. Distinguishable from an ordinary managing agent, the executive managing agent steps into the shoes of the trustees, has an extremely onerous fiduciary duty, and is liable for any loss suffered by the body corporate as a result of not applying care and skill,” Ms Constas said.

The word “alterations” have been included in the rule. The terminology of luxurious and non-luxurious improvement is no longer used.

Pre-paid meters have occasioned the creation of a new rule, which says that the body corporate, may with a special resolution, install separate pre-paid meters on the common property to control the supply of water or electricity to a section or exclusive use area.

The BC may by ordinary resolution give consent for a structure or building improvement if they are satisfied that it does not require other compliance, from the municipality, for example, which will help when owners wish to enclose balconies.

Now trustees are deemed to have given their consent for guide dogs, hearing or assistance dogs to reside with their owners and to accompany them on common property.

“Behaviour of owners, occupiers and visitors is a new rule which says that an owner or occupier of a section must not create noise and must take reasonable steps to ensure that their visitors do not behave in a way likely to interfere with the peaceful enjoyment of another section or another person’s peaceful enjoyment of the common property.

Undoubtedly, the increase in behavioural issues in sectional title schemes has prompted this additional rule,” Ms Constas said.

Visit: www.bbmlaw.co.za or call 011 622 3622 for more about the changes to the act and the workshops Ms Constas holds.

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